HSBC has been hit with a record £10.5m fine for mis-selling investment
products to elderly customers needing long term care.

HSBC has been hit with a record £10.5m fine for mis-selling investment products to elderly customers needing long term care.

This is the biggest ever fine issued by the Financial Services Authority to a retail financial services company. It has ordered HSBC to pay almost £30m compensation to those affected.

The FSA said that between 2005 and 2010, a subsidiary of the bank, NHFA (previously known as the Nursing Home Fees Agency) advised 2,485 customers to invest in investment bonds, and other asset-based products, to fund long-term care costs. The average age of these customers was 83 – and a sample review suggested that almost 90pc of these cases were mis-sold.

In total the amount invested in these products was close to £285m – meaning the average amount invested per customer was about £115,000.

The FSA ruled that this advice was unsuitable, because these products were designed to be held for a minimum of five years; but many of these customers were not expected to live this long. A combination of capital withdraw, and high product charges meant that people's money was reduced far faster than if they had been recommended alternatives – such as a high-interest fixed-rate account, or an Isa.

In addition the FSA said it was also apparent that the banks advisers had failed to consider the tax status of customers before making these recommendations.

Tracey McDermott, acting director of enforcement and financial crime said: "NHFA was trusted by its vulnerable and elderly customers, It breached that trust to sell the unsuitable products. This type of behaviour undermines confidence in the financial services sector.

"This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost."

She added that the FSA viewed the as particularly significant because NHFA's customers were very vulnerable, due to their age and health. NHFA was also the leading supplier in the UK of independent advice on long-term care products with a market share in recent years approaching 60pc.

Separately, HSBC announced that it would cut 330 jobs in the UK due to "the very challenging economic environment".

"HSBC is today announcing some proposed changes to various areas of our business that will result in the loss of approximately 330 roles in the UK ... in response to the very challenging economic environment and the bank's need to ensure it is working as efficiently as possible," a statement said.